What Does the Fiscal Cliff Mean for You?

The fiscal cliff. It’s the most boring political story of the year. It has none of the human drama of an election campaign. None of the white-knuckle terror of a financial system calamity. Just a lot of endless, tedious negotiations leading up to the inevitable deal. Except here we are—Dec. 31, 2012, and there’s no deal in place. We’re going to go “over the cliff.” Probably not forever. Probably some deal will pull us partially back in January. But for a little while at least, we’ll be cliffed. You may be sitting around on a Monday thinking about tonight’s party and mildly regretting having skipped past all of the past two months’ worth of fiscal cliff stories. It’s all about to happen, but you have no idea what it means. In particular, what does going over the cliff mean for you? Well, that all depends on who you are. Fortunately, I’m here to help you figure it out.

Are you a low-income, retired person who relies overwhelmingly on Social Security benefits for money? If so, you just hit the fiscal cliff jackpot. You don’t pay any taxes, so your taxes won’t go up. And Social Security cuts aren’t part of the cliff. In fact, quite the opposite. Virtually all the deals that have been in play in Congress this month involve averting the fiscal cliff in part by cutting Social Security by changing the cost-of-living adjustment formula. If you’re smart, you should hope there’s never a deal.